Transgenic mice which specifically express the human insulin gene in the pancreatic beta cells were obtained by microinjection of DNA into fertilized one-cell embryos. The elements regulating in vivo the beta-cell specificity of the insulin gene, located within a few hundred base pairs upstream to the start site of transcription, were used to construct hybrid genes expressed in pancreatic beta cells. Expression of SV40-T large antigen resulted in beta-cell proliferation and beta-cell tumors, while major histocompatibility, or interferon-gamma molecules induced diabetes mellitus in transgenic mice.